Jio effect: Telecom ministry asks Trai to revisit tariff orders

The Telecom Commission, the highest decision-making body for the sector, has communicated to the Telecom Regulatory Authority of India (Trai) the ''urgent need'' to review its tariff orders and directions. This comes in the backdrop of cut- throat tariff war unleashed by Reliance Jio and followed by Bharti Airtel, Vodafone and Idea Cellular.

The Commission has asked Trai to implement its decisions and directions on promotional offers issued in 2002 and 2008, both in letter and spirit.

Telecom Commission Chairman and Department of Telecommunications Secretary J S Deepak has in a recent letter to Trai Chairman R S Sharma said that there seems to be an urgent need for the regulator to “revisit its tariff orders, decisions and directions in the larger interest of government revenues as well as the telecom sector and also ensure orderly growth of the sector.” The letter stressed that the tariff war could even impact the ability of companies to make deferred payments for spectrum already purchased. At its meeting last week, the Telecom Commission had discussed the issue of tariff war among telcos resulting in revenue loss for the government.

In fact, in January, Vodafone had moved the Delhi High Court, alleging that Trai had failed to prohibit violation of its tariff orders, regulations and directions by permitting Reliance Jio Infocomm to continue with its free offers.

The tariff war, according to DoT, has adversely impacted the government’s licence fee collections, which otherwise showed a rise in the past few years, and in turn affected the financial health of the sector.

The Commission has asked Trai to implement its decisions and directions on promotional offers issued in 2002 and 2008, both in letter and spirit

The collections have fallen from ~3,975 crore in the first quarter of FY17 to ~3,584 crore in Q2, and further down to ~3,186 crore in the quarter ended December 31, 2016.

The main reason for the downward trend appears to be a tariff war in the industry triggered by free promotional offers, the DoT secretary said. However, the letter did not name any of the companies.

Since the launch of its free voice and data services in September 2016, Reliance Jio forced incumbents Bharti Airtel, Vodafone and Idea Cellular to bring down tariffs leading to a price war in the industry.

According to the Telecom Commission chairman, this phenomenon can have a severe impact on the financial health of the telecom sector, affect its revenue growth and in turn its capability to meet its contractual commitments including deferred payments to the government for the spectrum purchased.

Inability to service debt or meet its repayment obligations can further affect the investment and growth of the industry.